Just two months ago, Elon Musk speculated that Tesla Inc. would eventually be worth twice as much as Saudi Arabian Oil Co. — AKA Saudi Aramco, AKA the biggest listed company in the world with a market capitalization (then) of $2.1 trillion. As it turns out, the more relevant comparison is with a somewhat smaller oil major.
The symbolism of Tesla’s electrified market cap surpassing that of Big Oil stalwart Exxon Mobil Corp. in June 2020 was inescapable. By the beginning of this year, Tesla was 350% bigger than Exxon. Yet a lot has happened in the intervening (almost) 12 months and especially the last (almost) two months. Russia invaded Ukraine, sending oil markets crazy (good for Exxon). And then Musk invaded Twitter Inc., sending everyone crazy (not so good for Tesla). On Thursday evening, the platform hosted yet more convulsions as Musk suspended the accounts of several journalists on dubious grounds and deployed, with his unique phrasing, the term “assassination coordinates.”
Today, Tesla is only 16% bigger than Exxon. The symbolism can be overplayed. Oil consumption didn’t end in 2020 and EVs aren’t heading into the ditch today. Across those 30 months, however, it is worth noting that Exxon’s rehabilitation owes something to the unlikely success of an activist fund. Engine No. 1 LLC capitalized on investor disenchantment with Exxon’s high spending and weak returns to force board and strategy changes. Oil’s revival explains much of Exxon’s rally since then, but renewed capital discipline has also been crucial. The stock hit an all-time peak last month.
Under normal circumstances, one might entertain the possibility of an activist tilting at Tesla today. About $740 billion of value has evaporated in the course of just over a year. The chief executive, for all his genius reputation, overpaid for Twitter, tried to wriggle out of the deal, and then was forced to buy it. Along the way, he has sold a ton of Tesla stock and may yet leverage some of his remaining stake to refinance Twitter’s debt. He also risks burdening Tesla’s brand with his seemingly pathological desire to provoke on the platform. Musk has often boasted that Tesla never pays for advertising and it is now perhaps getting more free advertising than ever — just maybe not the best kind. That is particularly unhelpful at a time when Tesla is suddenly having to do what ordinary carmakers have always done: ease off production and offer incentives to manage softer demand. Meanwhile, long-laggardly rivals are now launching highly-regarded electric models of their own.
